After promulgating the Labor Contract Law, the Chinese legislature enacted the Law on Labor Dispute Mediation and Arbitration (hereinafter referred to as “the New Law”) to further safeguard the rights and interests of worker in procedural matters. The New Law took effect on May 1, 2008.
As the first law that specially regulates labor disputes between employers and employees in China, this New Law imposes more burdens and obligations on employers, making it seem pro-worker. But, is that an accurate perception?
1. New Provisions
A. Order of Payment
Among all the so-called worker-favoring provisions, there is order of payment which never appeared in any of the previous labor related laws and regulations. Pursuant to the New Law, an employee is entitled to apply to the people’s court for an order of payment on the basis of a mediation agreement when his employer fails to pay employees as required by mediation agreements between them. Since such an order of payment is mandated by the court, it will be easier for employees to get back outstanding payments related to salaries, medical fees and work injury compensation through mediation as prescribed.
B. Disputes with Workers Dispatched Under Labor Service Contract
Further, laborers are, for the first time, confirmed by law as a party to arbitration under dispute with respect to workers dispatched under a labor service contract. As a result, labor dispatch is possibly no longer an effective way for laborers to avoid legal risks related.
On the other hand, chances for workers dispatched by a labor service agency to get payment from their laborer will be more or less larger than before, because both the laborer and the dispatching agency would be liable if a worker wins the relevant arbitration. However, the law does not tell us how the laborer and the dispatching agency shall assume liability under the award.
Usually under Chinese law, debtors will undertake their responsibility either jointly and separately or ratably. Where they are responsible jointly and separately, workers enjoy a much happier life. Where they are taking ratable obligations, namely, due to the proportion of liability stipulated in the labor service contract, workers would still be helpless should the laborer or dispatching agency assuming the larger portion of the payment be in financial trouble.
Another potential problem in practice is that whether there will be different provisions like longer periods and/or more complicated procedures when the dispatched worker is a citizen of a country other than China? Both in the PRC Civil Procedure Law and Arbitration Law, procedures concerning foreign-related sides are different from those only regarding domestic parties. Maybe the implementation to this law or any other similar regulation is needed to clarify such a matter taken for granted by many foreigners and foreign-funded companies in China.
A. Burden of proof
According to the law, employers shall provide relevant evidences under his control upon request of the tribunal and within a stated period, even if such evidences may be favorable to the related laborer. Also, failing to provide those evidences may lead to adverse consequences for the employers.
Compared with the judicial interpretation on hearing of cases concerning labor disputes enacted in 2001, we can see that employers now bear a heavier burden of proof.
B. Advance Execution
Furthermore, the tribunal is entitled to, upon request of the employee in question, order the employer to make payment in advance before the final award is rendered. But such advance execution is only applicable to cases on labor remunerations, work injury medical expenses, economic compensation or damages. That is to say, the available claims thereto are the same with those for order of payment. Moreover, no security is required during workers’ claims for these advance executions, leading probably to the improvement to their financial conditions.
Of course, the authority shall, possibly with a judicial interpretation on the practice of advance execution, further make sure what can be deemed as “a clear relation of rights and obligations between the parties to a dispute,” which is set forth as one of the two “precedent conditions to such execution.” Without advance execution, life of the applicant could be seriously affected.
C. Time Limit for Arbitration
Then, among all the changes, the time limit for arbitration is mostly discussed these days. According to the PRC Labor Law, workers will lose the right of recovery if they fail to raise labor arbitration within 60 days from the occurrence of the corresponding dispute. Under the New Law, that period is extended to 12 months counting from the date workers know or should have known the infringement to them. However, when a dispute arises within the subsistence of labor relations due to labor remunerations, employees applying for arbitration will not be restricted by the 12-month period.
Yet, when the labor relations are terminated, the application for arbitration shall be submitted within 1 year after such termination. Hence, pursuant to the new law, workers can get back unpaid money due even 10 years ago, but whether it is applicable for those took place prior to the effectiveness of this law is still in doubt.
As to the interruption of the time limit, some questions may arise. For example, what will be deemed as either party’s claiming its rights? Which department can the parties claim their rights to? Whether the time limit will be deemed interrupted where the petition to a court is dismissed or withdrawn, or an application for arbitration is submitted after reconciliation? And, should the consent of either party receiving the other one’s claim be in writing or in oral, or both are applicable? Last but not least, whether extension of such time limit is applicable is not mentioned. This, to some extent, reflects the similarity of the New Law with those original rules upon labor arbitration.
D. Final Award
Another issue often focused on is finality of award decisions. For certain cases, awards rendered by the tribunal are final for the laborer, who is no longer entitled to bring lawsuit to the people’s court on this issue. It means that such final award can not be revoked unless he can prove that there are circumstances stated in Article 49 of the New Law. Following this arrangement, it will be quite hard for laborers to delay payment by raising a lawsuit due to their dissatisfaction with the award. Of course, applicable area to final award is also limited; it is the same with that for order of payment.
As in other provisions, some potential problem is left for clarification. These include: (1) whether the validity of the award shall be suspended during examinations of a reviewing court for revocation, and (2) whether a reviewing court shall reexamine all the disputes or only the part submitted as ground for the revocation of arbitral award.
Based on the above analysis, China is mainly focusing on the issue of delay or outstanding payment to workers since most of those provisions are limited to cases regarding some specific types of payments, but relevant regulations, especially corresponding arbitration rules shall be enacted and/or amended to cope with the aforementioned potential problems.
Article 2 of the New Law grants statutory jurisdiction upon labor disputes arising within the territory of China. And, the Chinese Government, when adopting the New York Convention 1958, declared a reservation that it would only apply this convention to disputes arising out of contractual or non-contractual commercial legal relationship under Chinese law. Since employment relationship is not classified as commercial either by Chinese courts and legislation bodies or by legal scholars, and that labor arbitration is both different and separate from commercial arbitration as set out in Article 81 of PRC Labor Law, New York Convention 1958 is not applicable to recognition and enforcement of awards to labor arbitration in China.
This New Law seems pro-worker only to some extent. The Chinese government avoids the issues of labor disputes concerning group of workers, non-competition and confidentiality, all of which are widely taken for granted. Companies can still go through the original procedures when faced with those problems. Although the new law makes it easier for employees to safeguard their economic rights and interests, China remains friendly for foreign investment. Hence, “shipping” a case to a more business-friendly shore is neither practical nor necessary for foreign-funded enterprises.